Why do options have only 2 decimals?

thecoder

thecoder

Why do options have only 2 decimals?
Since the price of an option is a fraction of the underlying, then options should have 4 decimals, much like the underlyings.
IMHO something is illogical in WallStreet...
 
You want 16 options exchanges and option markets quoted out 4 decimal places? With the current fractured markets, it is hard enough to buy on the bid and sell on the offer with your order on one exchange while it can trade on another. Adding 3-4 decimal places would make it even easier to trade a small value lower/higher and not allow customers to participate. IMO, this is not in your best interest.
 
thecoder said:
Why do options have only 2 decimals?
Since the price of an option is a fraction of the underlying, then options should have 4 decimals, much like the underlyings.
IMHO something is illogical in WallStreet...
More...
Underlyings with 4 decimals????

Are you referring to options on equity on the US market?
 
@rb7 , yes stocks have usually 4 decimals, therefore just wondering why options have only 2 decimals, whereas it's the options which need more decimals since their values (premium) are only a fraction of the spot of the underlying stock etc....
 
Robert Morse said:
Adding 3-4 decimal places would make it even easier to trade a small value lower/higher and not allow customers to participate. IMO, this is not in your best interest.
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Sorry, don't get it. Can you explain, pls.
It works well with stocks, so then it should also work with options, IMO.
 
It does not work well with stocks, IMO. We only offer that is stocks under $1.00. You bid $0.6501 for 2000 shares, a sell order comes into an equity Market maker, he can pay $0.6502 and shut you out. The same can happen in options.

thecoder said:
Sorry, don't get it. Can you explain, pls.
It works well with stocks, so then it should also work with options, IMO.
More...
 
thecoder said:
Why do options have only 2 decimals?
Since the price of an option is a fraction of the underlying, then options should have 4 decimals, much like the underlyings.
IMHO something is illogical in WallStreet...
More...

images


No! No 4 decimals!!!
elderly folks don't have great eye sights.

In fact, just 1 decimal is enough.
 
thecoder said:
Hey, Robert, sorry to say this, but there is IMO no logic in your argument, b/c if true then why not eliminate all decimals?... :)
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Well go try to have option prices with four decimals or even ten decimals in your country China to see how it plays out and then talk.
 
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